PTA.S1.Q25 - In one-round sealed-bid auction

anureet.bhatti

Did anyone take look at this question, why is the answer not C. It states that price of the reserve is set high enough to yield profit. That means that the seller will make profit on the item , hence the reserve price is needed for desirable item. Any thoughts?

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kwillar9

I have done this question before (months ago). Reading it again now, my own RRE is that maybe extremely valuable items being put in these auctions leads to fewer people bidding on the items. A few people MAY know this, and you'll risk having one of these persons place a low bet that is the only bet (weak, I know, but that's all I could think of). And probably this is what made me gravitate towards AC D.

My reasoning for why C is wrong is that it doesn't seem to explain why valuable items like the Hope Diamond necessitate placing token bids. You'd think rich wackos would still be all over it and that likely every item in the auction would have a token bid that would generate a profit for the owner.

AC E explains the situation by saying, "the rich wackos bidding on these items think that they will have to bid so crazily high that they likely don't even bother biding, therefore making it more likely for them many of them no to bid at all, leading to the possibility that we'll have really low bids on the item."

REALLY hard question. At least for me. I hope my explanation was at least a little helpful. I wish the master, JY, would do explanations on these. However, I like to think of these PT's that don't have explanations as an opportunity to pick your own brain, and hopefully learn something and make new LSAT brain cells in the process.